Fri, August 20, 2010
World > Asia-Pacific > Australia federal elections

Australia faces risk of hung parliament post poll

2010-08-20 03:06:44 GMT2010-08-20 11:06:44 (Beijing Time)

Australian Prime Minister Julia Gillard arrives at a townhall meeting as part of her election campaign in Brisbane August 18, 2010.(REUTERS/Jason O'Brien)

Australian Prime Minister Julia Gillard makes one of her final speeches for her election campaign at the National Press Club in Canberra August 19, 2010(REUTERS/Andrew Taylor)

Australia may be headed for a hung parliament with an election-eve opinion poll showing the ruling Labor party has lost its slim lead and is now level with the conservative opposition, a worst-case scenario for investors.

A minority government, and its inherent uncertainty could, represent the worst outcome for Australia, risking policy gridlock, investment paralysis and an Australian dollar sell-off.

Without a clear winner, the next government would have to rely on a handful of independent or Green MPs to form government, leaving policies such as Labor's new mining tax in limbo.

Even a razor-thin win by Labor Prime Minister Julia Gillard would diminish her mandate to introduce the 30 percent resource tax, the cornerstone policy of her campaign, and leave her weakened as she seeks to have a hostile Senate pass the tax.

"Labor's polling nightmare has materialized," wrote Dennis Shanahan, political editor of the Australian newspaper. "As voters prepare to go to the polls, the government is hanging on by its collective fingernails."

A Reuters Poll Trend published on Wednesday showed Labor was poised for a narrow win.

Gillard deposed former Labor Prime Minister Kevin Rudd on June 24 in a desperate bid by the party to avoid electoral defeat, but she has struggled to woo voters, with many angry at the party coup that dumped Rudd.


In the closing days of a five-week campaign voter disillusionment with Labor and the conservatives, led by Tony Abbott, has left the election result unclear.

Another survey, the Galaxy poll, still tipped a narrow win for Gillard's Labor, with 52 percent support against 48 percent for conservatives.

Two of the three key independents, who may decide who takes office in the event of a hung parliament, have said they cannot guarantee passage of a minority government's budget, leaving the possibility of a fiscal crisis or a short-lived government.

One financial analyst has tipped a 2-5 percent fall in the local dollar if Australia has a minority government.

The Aussie was trading at $0.8890 in morning trade on Friday, down from $0.8975 late on Thursday.

Newspaper editorials were divided on Friday as to who should form Australia's next government.

Sydney's Daily Telegraph urged voters to elect a conservative government, with a front page headline "Yes He Can," borrowed from U.S. President Barack Obama's campaign line "Yes we can."

The Sydney Morning Herald said Labor "deserves a second chance" since it had successfully steered Australia through the global financial crisis. Australia was the only major developed nation to avoid recession.

Gillard and Abbott have campaigned hard on Labor's economic credentials. Both have also promised to cut immigration in a move to appease voter concerns over boatpeople arrivals and creaking infrastructure in major cities.

But economists fear substantial cuts in immigration will curb growth in consumer demand while reducing skilled labor needed to feed a mining boom, potentially stoking wage and price pressures.

Labor has also pledged to take action on climate change with a possible carbon trading scheme and to construct a $38 billion fiber-optic national broadband network. The Liberal-National opposition opposes these plans.

With no single overarching election policy, the issues of the mining tax, carbon trading and a broadband network will resonate in different electorates, leaving the outcome of the poll resting on key marginal seats in the resource states of Queensland and Western Australia, and the outer suburbs of Sydney and Melbourne.

In a last-minute bid to win over voters, Abbott said he would campaign non-stop for the last 36 hours before polls open, while Gillard has taken to the streets of western Sydney to woo so-called "mortgage-belt" voters.


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